This month’s rally in German government bonds pushed the yield on Europe’s benchmark 10-year securities down by the most since May 2012, two months before European Central Bank President Mario Draghi pledged he’d do whatever it takes to preserve the euro. Analysts say there may be more to come.

Germany’s 10-year bund yield dropped 30 basis points in January as turmoil in financial markets and the Bank of Japan’s adoption this week of negative interest rates fueled demand for the relative safety of fixed-income securities. Two-year note yields from Austria to Ireland slumped to fresh lows. And after Draghi’s signal on Jan. 21 that policy makers may expand stimulus as soon as March, yields could fall still lower.

“Fundamentally the environment is quite supportive” for German bonds, said Vincent Chaigneau, global head of rates and foreign-exchange strategy at Societe Generale SA in London. “In terms of portfolio flows, that’s going to make western bonds more attractive, now that you have negative rates in Japan. It also somehow revives the currency war theme and that raises the question about how aggressive the ECB could be in March.”

German 10-year bund yields tumbled 16 basis points, or 0.16 percentage point, this week to 0.33 percent as of the 5 p.m. close in London Friday, after touching 0.32 percent, the lowest since April. The 0.5 percent security due February 2026 rose 1.565, or 15.65 euros per 1,000-euro ($1,083) face amount, to 101.725.

ECB Credibility

Draghi gave bonds a further shot in the arm on Jan. 26 when he reiterated that the central bank will seek to meet its inflation mandate.

Concern about the slowdown in China has helped sovereign debt to outperform other asset classes since the start of the year. While euro-area securities returned 1.3 percent this month through Thursday, the MSCI Index of world stocks lost 7.9 percent including reinvested dividends in the same period.

While global risk sentiment will dominate market direction next week, Chaigneau said he’ll also be looking at the final reading of euro-area manufacturing and services gauges. Producer-price inflation and unemployment data for December will also add to evidence about the state of the euro-region economy. Germany is scheduled to auction notes due in April 2021, while France and Spain plan to sell sovereign bonds.